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SMALL GOVERNMENT VS STINGY GOVERNMENT

Please consider this excerpt from The Road to Serfdom, by Friedrich Hayek, the legendary free-market economist, appearing at page 87 of the Bruce Caldwell “Definitive Version” of the work:

“There are, finally, undoubted fields where no legal arrangements can create the main condition on which the usefulness of the system of competition and private property depends: namely, that the owner benefits from all the useful services rendered by his property and suffers for all the damages caused to others by its use. Where, for example, it is impracticable to make the enjoyment of certain services dependent on the payment of a price, competition will not produce the services; and the price system becomes similarly ineffective when the damage caused to others by certain uses of property cannot be effectively charged to the owner of that property . . . Thus neither the provision of signposts on the roads nor, in most circumstances, that of the roads themselves can be paid for by every individual user . . . In such instances we must find some substitute for the regulation by the price mechanism. . . . “

English translation: Free-market competition yields better outcomes than governmental action (“central planning,” in Hayek’s lexicon), with only one exception: where too many of the people who would benefit from a project or enterprise would be unwilling or unable to pay for it. Everyone uses the roads, but not enough people could afford to pay their usage-based share of the price for the building and maintaining of them, so the roads would not get built without governmental action.

A suggested corollary to the Hayek proposition: Just as government should do what only it can do, government should not do what the private sector can do better or at lower cost. Government should outsource everything but its core competencies, which are few.

Hayek would have been fine with President Eisenhower’s decision to fund and manage improvements to the nation’s infrastructure, such our interstate highway system, built during the 1950s. (See William J. Bennett for corroboration of this inference:

We already had toll roads by the ‘50s, and many more have been built since them, and some can be maintained primarily through toll revenues, but it has always been unrealistic to assume that tolls would pay for the original construction of a toll road.

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President Trump is a Hayekian (even if not a conventional “conservative”), in that he would build infrastructure but avoid regulating it. He believes improved infrastructure would contribute mightily to the nation’s economic growth, but excessive regulation would impede growth.

Republican opposition to Mr. Trump’s economic policies is curious. The ideological Right, while continuing to belittle him for tastes and manners that might be OK at Wharton but not at Yale, senses the president is not one of their own; they are scandalized not only by his manner but by his apostasies involving increased federal-spending and modified trade-relationships. The moderate Right is even-less reasonable: they claim to seek healthcare reform and tax reform but find excuses to oppose initiatives to achieve them; they are stunned when the president takes seriously his pledge to restore free-market pricing to healthcare and economic sense to our tax structure. Neither the ideologues nor the moderates seem won-over by the president’s nomination of an original-meaning jurist to the Supreme Court, his revocation of Obama’s DACA executive “memorandum,” or his massive reductions in federal regulations. They seem frightened by his switch to a “big stick” posture on national security.

The suggestion here is that the president is essentially a conservative, and that he is misunderstood because few people are willing and able to distinguish between reducing government regulations (the “size of government”) and reducing government expenditures. The president wants to reduce regulations; red tape drives him wild. He hates it when meritorious business ventures, like the Keystone Pipeline, are held back by regulators with political agendas. But he supports federal assistance for recovery from major disasters (viz, Hurricane Harvey) and resists cutting Social Security and Medicare. (He does not seem to share Hayek’s ambivalence about whether entitlements are re-distributive steps down the road to serfdom.) The president’s main priority is economic growth, which is needed if we are to pay for entitlements.

The president is more of a conservative than many of his detractors, even though his conservatism is based upon his business experiences and instincts. He is anti-regulation but not anti-government. He is pro-markets but willing to provide governmental assistance. Do his critics miss the point because they, too, are distracted by matters of taste and manners?